China Invests In Mexico’s Nearly Non-Existent Rail System

In the absence of a strong rail system — which requires a competent, non-corrupt central government to build — Mexico has created one of the world’s finest long-haul bus networks.

— Jason Clampet

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China Railway Construction Corp. led a group that won a bid to build a $4.3 billion high-speed train line in central Mexico, marking the first large investment in transportation by a Chinese firm in the nation.

The Beijing-based company said it will turn to the Export- Import Bank of China to help finance its $2.9 billion portion of the contract. The train will initially shuttle 27,000 passengers a day between the capital and the industrial hub of Queretaro City in 58 minutes, Mexico’s government said today.

The announcement follows Chinese President Xi Jinping’s visit to Mexico and Enrique Pena Nieto’s trip to Beijing last year and negotiations for an infrastructure fund between the two nations. Finance Minister Luis Videgaray said in March that Chinese investment would have “huge potential” for Mexican jobs.

“This is the first time China has been interested in such a significant investment in transportation infrastructure here,” Javier Gayol, a Corporativo GBM SAB analyst, said in a telephone interview in Mexico City. “It’s important because you’re attracting international groups with better technical knowledge of infrastructure projects to participate in Mexico. Improving competition should improve the level and quality of these projects.”

The bidding process came under scrutiny by the opposition National Action Party which said the sole bid by the group was too expensive and that insufficient time was given to other companies to present their projects. Communications and Transportation Minister Gerardo Ruiz Esparza has said the construction cost of $3.2 billion is less than originally budgeted and Mexico had given companies since last November to prepare.

CSR Corp., a member of the group, is in merger discussions with China Northern Locomotive & Rolling Stock Industry Group Corp. The two biggest trainmakers in China, if they become one company, would have $33.6 billion in sales and $1.44 billion in net income in the past 12 months, according to data compiled by Bloomberg.

To contact the reporters on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net; Linly Lin in New York at llin153@bloomberg.net. To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net.